Restoration of US GSP: Some observations

We have for some time been locked in rhetoric and war of words over the temporary 'loss' of trade benefits under US Generalised System of Preferences (GSP). Emotional outbursts have taken centre-stage in the country on the modalities of winning back the lost privileges, with the US still sticking to the suspension. It is often said that Bangladesh will get back the trade facilities if the issue is not 'politically twisted'. In support of this claim, the oft-repeated argument being put forward is that out of 16 prescriptions, 13 have been followed --- with the rest three being at the completion stage. Any encouraging response, however, from the US side has yet to be forthcoming.
Let us say a few words with reference to the GSP regime. It encompasses a unique offer to lift the less developed countries from the vicious cycle of economic backwardness and bring about economic development there. The benefits accruable under the GSP facility are unilateral, non-reciprocal and non-discriminatory for developing countries including special measures in favour of the least developed countries (LDCs). All products of a country are not covered under a GSP regime.
Only those products which are included in the Rules of Origin of a particular scheme are eligible to enjoy differential and zero rate of duty to enhance a country's competitive edge. Bangladesh, being an LDC, almost all its eligible products enjoy entry into the export destinations on zero duty. Exception is that for Bangladesh, ready-made garment (RMG) items are not duty-free under the US GSP scheme, and more than 12 per cent import duty is imposed on all apparel products that enter the ports of that country.  The unique feature of the scheme is that the benefits are extended with no strings attached, and the donor country does not ask for similar benefits from a beneficiary country. Rather, a donor country sacrifices a good chunk of revenue income in the form of customs duties on imports from the beneficiary countries. This exceptional offer may be termed a kind of aid through allowing trade into a donor country duty-free.  
This remunerative offer from the developed countries does not guarantee free rides for the beneficiaries. Availing of benefits without interruption is contingent upon fulfilling certain obligations, which have been enunciated in the US Trade and Tariff Act of 1984. Section 507(4) of the Act provides a definition of internationally recognised workers' rights which includes protection of Intellectual Property Rights, the right to association, the right to organise and bargain collectively, acceptable conditions of work with respect to minimum wages, hours of work, occupational safety and health. A country can lose some or all the GSP privileges if it continuously fails to meet these requirements.
IT DID NOT TAKE PLACE ALL ON A SUDDEN: It would be pertinent to go for an in-depth look at the problems that continuously had afflicted Bangladesh in the past. The suspension of GSP benefits for Bangladesh has not occurred all on a sudden and abruptly. We have a long history of utter negligence and inability to abide by the prescribed conditions for years together. For the last 23 years, the American Federation of Labour and Congress of Industrial Organization (AFL-CIO), a very powerful and influential labour organization, has been repeatedly hammering the office of the United States Trade Representative (USTR), an agency responsible for developing trade and recommending US trade policy to the President, for suspension of the GSP benefits for Bangladesh since 1990. The AFL-CIO filed 'country practice petition' against Bangladesh to USTR in 1990, 1999, 2004, 2005, and, lastly, in 2007 complaining about flagrant violation of labour rights and labour rights limitations in the EPZs. In the last petition, AFL-CIO unequivocally stated, "The government of Bangladesh has been too neglectful for too long shirking the duty to protect workers who are the backbone of Bangladesh economy……" The suspension of benefits under GSP for Bangladesh expedited with the murder of labour activist Aminul Islam in 2012, and the shocking fire accident at Tazreen Fashions. The last nail was put into the coffin after the collapse of Rana Plaza building killing over 1100 workers in the worst industrial accident in Bangladesh, which moved the world conscience.
The above scenario adequately suggests that the suspension of GSP facility was not politically motivated. Rather over the last several years, Bangladesh did not take the whole gamut of the issue in right earnest for implementing compliances in the RMG sector. Every government over the years took the issue casually, and resorted to procrastination when it came to remedial measures on the factory premises. Thus, the problems snowballed into insurmountable proportions and the inevitability ultimately could not be averted.  
A SUCCESS STORY: Here we would like to refer to a success story that the government was able to bring forth in the past. During the early part of the 1990s, employment of child labour in the RMG units in Bangladesh created a lot of uproars throughout the world. This prompted US Senator Tom Harkin to introduce a Bill in the Senate for enactment of 'The Child Labour Deterrence Act' which is popularly known as the Harkin Bill. The Act banned import into the USA the products made by children in whole or in part.  The government played an active role in the formulation of a Memorandum of Understanding (MoU), which was signed between ILO, UNICEF and BGMEA for summary dismissal of child workers removing them from the factories and placing them in schools. In the process, over 50,000 child workers were removed, making the RMG sector child-free.
Suspending the eligibility of Bangladesh for tariff benefits under GSP programme on  June 27, 2013, the US Administration invited Bangladesh for initiating fresh discussions for taking steps to improve the working environment in the RMG factories in the line with 'guidelines' as enumerated in the US Trade and Tariff Act 1984, so that GSP benefits could be restored. The US Administration has also asked for appointment of 200 factory inspectors, punitive actions for violation of building and fire safety rules, creating publicly accessible data-base for all garment factories containing  workers, fire and building inspection, establishing an effective mechanism through which workers can report on violations of fire, building safety and labour rights confidentially. It called for setting up more fire stations in the areas dense with garment factories, separate law for workers inside the Export Processing Zones (EPZs), permitting the workers to demonstrate for realising their demands and safeguarding the interest of the workers in the shrimps factories.
WHAT MATTERS MORE: It is often said that Bangladesh would be able to win back the GSP benefits conforming to the requirements set by the USA, if the political motive does not work in this case.  The violation of GSP conditionalities provides that the US can use international political leverage to preserve its foreign and commercial interests in the form of 'penalties'. However, there is less likelihood for the use of 'disqualifications' as contained under Section 507(4) of US Trade and Tariff Act as political tool by the US.  As a matter of fact, the US Administration has allowed a long span of time ignoring the continued pressure from the AFL-CIO so that Bangladesh can bring about desired improvements in its apparel industry. Now for Bangladesh, compliance of the prescribed doables matters most.
 At one stage, the BGMEA has demanded re-fixation of standards in line with the national building code as the standard set by the retailers is too costly and time-consuming. Such a negative development brings to the fore an ominous sign when we are supposed to go to any length to reclaim the lost GSP benefits from the USA. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) members might have in the back of their mind that apparels are not covered under the US GSP, and hence they have nothing to lose even if the trade benefits are not reinstated. It is worth mentioning that the European Union (EU) also joined the US for tangible action to make the apparel industry compliant. The impact might be far-reaching if the EU is influenced to follow suit. The BGMEA  should not be forgetful of the fact that that the 'Sword of Damocles' is hanging over our head and the non-compliance in any form might wreak a great havoc on the garments trade in the country if the EU considers that continuation of benefits for Bangladesh under GSP is not warranted any more. In that event, the country would lose duty-free entry into the enlarged EU market and its aftershock will be unbearable for the country's trade.
On February 09, 2014, a newspaper published an investigative report on some factories in Bangladesh as reported by ITV, a British television network. Their findings include verbal and physical abuse of workers, slapping and kicking of workers for not working faster and forcing child workers as young as 13 years to work for 11 hours. Managers of some factories intimidate, mistreat and threaten to kill the workers if they are involved in setting up unions. Unions' organisers are beaten and they even lose their jobs and are made to resign in the process. Some factory owners employ local gangsters to threaten or attack the workers outside workplaces. These are not auspicious signs and should not be taken lightly. The BGMEA must identify these non-compliant factories and take action against the RMG unit owners to weed out such irregularities from the factories. If such incidents continue unabated, this may stand in the way of getting back the GSP benefits from the USA.
NO ALTERNATIVE: There is no alternative to regaining the US GSP benefits. Since the benefits are extended unilaterally, it is the exclusive jurisdiction of the US Administration to revive the GSP benefits for Bangladesh or withhold it. No preposterous arguments will yield any positive result. Reinstatement of privileges by the US solely depends on satisfactory remedial steps in the apparel factories.  What is now required is to bring the USTR into confidence demonstrating satisfactory compliance in the apparel industry, as outlined by the US Administration.
April 15, 2014 is the deadline by which time Bangladesh is required to submit to the USTR its compliance report.  The government may specifically look into the Labour Law, amended in 2013, which, in the observation of the USA, contains severe restrictions on collective bargaining both inside EPZs and outside. If some of the USTR requirements remain unfulfilled within the time-frame, officials concerned of the Ministry of Commerce may sit with the BGMEA, and the US representatives in Bangladesh in an atmosphere of cordiality seeking further time for smooth compliance.
The writer is director (retired), Export Promotion Bureau, Bangladesh. [email protected]